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Recently Passed Indiana Health Care Statute Contains Surprising New Physician Non-Compete Restrictio Recently Passed Indiana Health Care Statute Contains Surprising New Physician Non-Compete Restrictio

Recently Passed Indiana Health Care Statute Contains Surprising New Physician Non-Compete Restrictions—Health Care Employers Beware!

As the most recent Indiana legislative session started, rumor swirled of the "elimination of non-competes for doctors in Indiana" and other fantastic tales. Such a turn of events would indeed be shocking.
 
No such paradigm shift occurred. Nonetheless, House Enrolled Act 1004, recently signed into law by the Governor, places new, important, and interesting restrictions on physician non-compete provisions, whether in an employment agreement or other type of contract.

I.C. 25-22.5-5.5 now becomes a new chapter to the Indiana Code, and it becomes effective on July 1, 2020. Likewise, it applies to physician non-compete agreements originally entered into on or after July 1, 2020. It sets forth a new set of requirements for physician non-compete agreements. Significantly, failure to follow these requirements renders the non-compete agreement UNENFORCEABLE.

Henceforth, all of the following provisions must be in an Indiana physician agreement containing a non-compete:
 
  1. A provision that requires the employer of the physician to provide the physician with a copy of any notice that:
    1. concerns the physician's departure from the employer; and
    2. was sent to any patient seen or treated by the physician during the two (2) year period preceding the termination of the physician's employment or the expiration of the physician's contract. Provided, however, the patient names and contact information be redacted from the copy of the notice provided from the employer to the physician.
  2. A provision that requires the physician's employer to, in good faith, provide the physician's last known or current contact and location information to a patient who:
    1. requests updated contact and location information for the physician; and
    2. was seen or treated by the physician during the two (2) year period preceding the termination of the physician's employment or the expiration of the physician's contract. 
  3. A provision that provides the physician with:
    1. access to; or
    2. copies of;

      any medical record associated with a patient described above upon receipt of the patient's consent.
  4. A provision that provides the physician whose employment has terminated or whose contract has expired with the option to purchase a complete and final release from the terms of the enforceable physician non-compete agreement at a reasonable price. However, in the event the physician elects not to exercise the purchase option, then the option to purchase provision may not be used in any manner to restrict, bar, or otherwise limit the employer's equitable remedies, including the employer's enforcement of the physician non-compete agreement.
  5. A provision that prohibits the providing of patient medical records to a requesting physician in a format that materially differs from the format used to create or store the medical record during the routine or ordinary course of business, unless a different format is mutually agreed upon by the parties. Paper or portable document format copies of the medical records satisfy the formatting provisions of this law.
Section 3 of the law states that a person or entity required to create, copy, or transfer a patient medical record for a reason specified in this law may charge a reasonable fee for the service as permitted under applicable state or federal law. Other sections of the law elaborate on the rights of physicians and their patients concerning access to patient medical records.

Section 4 of the law reiterates that nothing in this new law shall be construed to prohibit, limit, impair, or abrogate parties' rights to otherwise negotiate other non-compete terms and that nothing in this new statute should be construed to limit any parties' other legal rights and remedies, including equitable relief, e.g. injunctions.

What may we expect in terms of fallout from this new law? First, get ready for fireworks over what constitutes a reasonable purchase price for the buyout from the non-compete. One way employers may minimize the risk of a dispute related to this issue would be to develop an explicit mathematical formula for use in the new employment agreement.

Second, while providing notice to patients of a physician’s departure constitutes no new requirement under Indiana law, employers of physicians must continue to use their words carefully concerning communications to patients, given the new notice obligations. This enhanced obligation invites litigation by physicians for defamation or tortious interference with business relations if employers acted recklessly on this front.

Third, while non-competes remain under attack nationwide, in general, and with respect to physicians in particular, reasonable non-compete restrictions remain enforceable under Indiana law and consistent with public policy as expressed by the Indiana Legislature.

Indiana non-compete law just got more complicated, and now provides even more traps for the unwary. Wise employers will step carefully in this area. Remember, failure to comply with these new rules renders the non-compete unenforceable under Indiana law.

For more information, contact David J. Carr or another member of the Ice Miller Labor and Employment Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
 
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